Copel’s Innovative Offer to Convert its Publicly Traded Shares to Units
April 20, 2021
Cleary Gottlieb represented Companhia Paranaense de Energia – Copel (Copel) in its offer to convert five shares of any class into units, with each unit representing four preferred Class B shares and one common share.
By establishing units, Copel sought to improve the liquidity of the trading market for its equity securities.
Before the conversion offer, American Depositary Receipts (ADRs) representing Copel preferred Class B shares traded on the New York Stock Exchange. In connection with the conversion offer, all the ADRs were amended so that today the NYSE-traded securities are ADRs representing Units.
Under U.S. securities laws, the conversion was an issuer exchange offer (subject to Rule 13e-4 and Regulations 14D and 14E under the Securities Exchange Act) and a take-private transaction (subject to Rule 13e-3). As a result, Copel filed its conversion offer with the SEC and obtained an exemptive order for features of the transaction that were designed to accommodate differences between Brazilian and U.S. procedures.
The conversion offer launched on March 22, 2021, and expired on April 20, 2021. It was subject to a minimum participation condition, under which it would only be completed if at least 60% of Copel’s free float was converted to units. The minimum participation condition was met, and unit ADRs began trading on the New York Stock Exchange on April 28, 2021. The conversion offer represents the first time a U.S.-listed Brazilian company has converted its shares into units.
Copel engages in the generation, transmission, distribution, and sale of electricity mainly in the Brazilian state of Parana, pursuant to concessions granted by ANEEL, the Brazilian regulatory agency for the electricity sector. It also provides telecommunications and other services. While Copel’s activities are mainly concentrated in the Brazilian State of Parana, it also operates in 10 different Brazilian states through its generation and transmission businesses.